March 8, 2014


CBC hidden camera investigation
Can you trust your investment advisor? That’s a very important question for your financial success. CBC Marketplace investigated advisors at 10 major firms and found some ‘atrocious’. Watch this short video using hidden cameras for examples. For the full version, watch Show Me The Money.

The examples may be extreme and unrepresentative but they did happen. Buyer beware. Buyer prepare.

Clarity And Competence?

Dollars are easier to understand than percentages, but …
“The financial industry  doesn’t have to tell you how much investing can cost you in dollars and cents.”  — Erica Johnson, Show Me The Money
Where there’s complexity, you benefit from advisors who simplify without distortion. Let’s look at an example: mutual funds.

Fees on mutual funds are charged on the total amount you have invested (your capital and the growth/loss on that capital). The math gets complicated because you’re shown an annual charge (e.g., 2%) but that’s converted to a daily equivalent and deducted daily. You’d expect an advisor to know the mechanics well.
“If can’t explain the fees on a mutual fund, which is such a popular investment in Canada — almost a trillion dollars is invested in them — you should not call yourself a financial advisor.” — Preet Banerjee
The hidden camera showed examples of poor explanations. For instance
“That fee is … umm … it’s on the percentage of returns of the fund. So … it’s … like … sorry just want to make sure I’m thinking about this properly. Like it’s not on … just seeing if I can find, like, an easy definition.” — bank advisor
The lesson? You can’t assume advisors have solid financial education. Yet they are employed. What does that tell you about the accreditation process and the standards of their employers? An advisor who doesn’t know can ask for help … or do a Google search.

What’s Worse?

Life and health products are much more complex than investments because you’re now dealing with the actuarial elements of risk (e.g., mortality or morbidity) and have the additional worry of how to get your claim paid. That makes them harder to understand, explain and compare. Getting suitable help is even more important and difficult.

Some advisors sell both insurance and investments, but how well?

The Big Surprise

The big surprise is if you’re surprised by the CBC’s findings. There’s enough information online to raise concerns about advisors. Ask around. You’re bound to hear horror stories if you ask others what they think they bought and what they think they pay.

You may not have a hidden camera but can take notes or record the audio with your smartphone (seems legal). Protect yourself. Protect your money.


PS "Financial advisor" is among the five job titles in most demand by employers, according to Workopolis.

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